“What happened 10 years ago was a tragedy, but what has happened since has been a scam because the politicians won’t do the one thing that will get the pensions back," said Joshua Gotbaum, who led the PBGC from late 2010 until 2014, under President Obama’s administration.
Gotbaum contends that Trump does not have the authority to direct the PBGC or anyone else to create a carve-out for the salaried retirees, no matter how sympathetic they or their cause are. The PBGC is bound by law to honor statutory formulas when it takes over a pension, formulas that control how much it pays retirees, he said.
“The only way these pensions are going to come back is by Congress taking action," he said, adding: “Congress sets the rules here."
No president or cabinet secretary can direct the PBGC to ignore those rules, he said. But Congress can craft a legislative remedy, he also said. “That is something that the Congress can do.”
The retirees have argued, and continue to argue, that their pensions were “needlessly terminated.” They also say that the market has performed so well since 2009, that the PBGC has the means to pay their full pensions. And they contend further that the PBGC has not been transparent about the size of the assets it controls.
Peter Navarro, Trump’s director of trade and manufacturing policy, said in an interview with the Dayton Daily News Friday the Trump administration is “pushing hard” for an administrative solution. But that will depend in part on what he called “transparency” by the PBGC in revealing the size of the pension plan assets it controls.
Navarro rejects Gotbaum’s interpretation.
“That’s the party line,” Navarro said of Gotbaum’s take, adding: “But that’s the worst party I’ve ever been to.”
“My office is going to be the tip of the spear," Navarro added. "These folks have gotten the memo, literally.”
A spokesman for the PBGC declined to comment.
“We played by the rules,” Bruce Gump, vice chairman of the Delphi Salaried Retirees Association, said Thursday. "The involuntary termination of our pensions was wrong. It did not have to happen. This (Trump’s memorandum) means so much to the future of these retirees, their families and communities in many states.”
U.S. Rep. Mike Turner, R-Dayton, has long championed the retirees. He said the memo paves the way to a possible executive order or legislative action.
In the past, the retirees' federal lawsuit against the PBGC has been cited as a roadblock to congressional action. Most recently, the 6th U.S. Circuit Court of Appeals has affirmed a lower court ruling and found that the PBGC’s actions “cannot be found to be arbitrary and capricious.”
“What the president did today, instead of intervening in that litigation, he directed his cabinet members ... to review the actions of the PBGC in the termination of this plan, in the management of the plan, and to provide to the president a plan for restoring the pensions,” Turner told the Dayton Daily News Thursday, referring to Trump’s memorandum.
The secretaries of labor, commerce and treasury serve on the board of the PBGC, Turner noted.
“The retirees believe that the money is there to make the plan whole,” Turner said Friday. “The president’s action recognizes that if there is a gap (between what the PBGC has and what the salaried retirees are owed), he supports going to Congress.”
In 2009 the PBGC took control of the Delphi salaried pension plan which covered more than 20,000 people, including likely thousands here in the Dayton area. The PBGC’s decisions resulted in losses up to 70% of those pensions for those retirees.
Gotbaum says the pension termination cannot be undone, because the company that was once that pension plan’s sponsor no longer exists.
“You can’t give back Delphi’s pension, because the Delphi company that owned it, that sponsored it, is gone," he said.
For most pensions, PBGC benefits come close to full payments of what retirees expected. But for some “well paid” employees, there is a “cap,” Gotbaum said.
He believes that one reason Congress has not acted on the matter is that the Delphi salaried group is not alone. Many steel company and airline retirees saw their pensions go to the PBGC and “get cut," Gotbaum said.
“I think part of the reason why you haven’t seen the Congress of the United States say, ‘Let’s make the Delphi retirees whole,’ is I think they would feel a moral obligation to make the workers at United (Airlines) whole. And to make workers at Bethlehem Steel whole," he said.